Global power without matching obligations....

...That’s how I diagnose the current financial crisis. (See update on next page.)

Government bailouts (i.e., taxpayers) may satisfy the markets for a while, but the appetite of these “markets,” especially the elite that rules the capital markets, is insatiable. Sooner or later, they will return to their old habits unless the multi-billion dollar rescue operation curbs the irresponsible power they now have. Fundamental reforms are necessary.

Can you imagine the hilarious operetta Gilbert & Sullivan would have written about this debacle? Take what they would have done with the antics of one leading player, the U.S.-based American International Group Inc., the world’s largest insurance company that dabbles in non-insurance businesses.

Under the unregulated global freedom granted it, AIG has expanded into 130 countries and territories, with some 100,000 employees worldwide. Now AIG’s expansion itself is deemed to make it “too big to fail,” and somehow qualifies it to turn to American taxpayers for a two-year loan it needs to survive -- $85,000,000,000. In return, says the September 16 AIG press release, “American taxpayers will receive a substantial majority ownership interest in AIG.”

Well, as an American taxpayer, thank you very much, AIG. But I didn’t ask to own you.

I just hope that the guys who negotiated this deal for me and other surprised American owners will do what they failed to do before: match AIG’s powerful rights with corresponding responsibilities and accountability.

Pardon me if I wonder whether they will really do so

“AIG was not too big to fall, but too connected,” writes the Financial Times. Remember that the well connected men who arranged the AIG bailout, and are still making more and more bailouts, belong to the ailing system that they are supposed to cure.

They themselves are creatures of Wall Streets. They are immersed in its culture. They may be right in warning that we are at the brink of unprecedented disaster and that we must respond as they ask. But must we be unquestioning in accepting direction from the types of Wall Street insiders who brought us to that brink?

UPDATE

Now, late Saturday, these same insiders have persuaded the President to ask Congress for the power to pay up to $700,000,000,000 for the troubled assets of unspecified financial institutions. This unprecedented bailout, unless amended by Congress, is a one-sided deal in the familiar pattern of dispensing huge national resources to private entities without requiring any responsibilities beyond the minimal one of ultimate repayment of taxpayer money (if possible).

The proposed deal requires careful and calm scrutiny, unmarred by charges again that those seeking to defend the common good are somehow lacking in patriotism.


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Worker rights as an economic asset

Protecting worker rights as part of trade policy can be good for the economy. So says report just released by a Washington think tank, the Center for American Progress.

“The promotion of labor standards, alongside environmental protections, should be an integral part of the future U.S. trade agenda,” says the report titled “Labor Rights Can Be Good Trade Policy.”

The authors, Christian E. Weller and Stephen Zucconi, warn that, to be effective, the worker rights provisions of trade agreements must be enforced with “positive incentives for moving toward better labor standards, and negative incentives, including sanctions, when benchmarks are not met.”

Nearly a third of the 34-page report consists of data buttressing their points, including the fact that “stronger labor rights are correlated with smaller trade balances,” for instance, and that U.S. trade is more balanced with countries that have better worker rights.

Yet improving standards won’t, by itself, produce impressive results. That’s a crucial point emphasized in the Center report. Adopting global labor standards, Weller and Zuicconi insist, is a “key”(but not the only) element in a “broader” progressive international policy agenda to grow the global middle class.

In other words, improving labor standards in the North American Free Trade Agreement, as Senator Obama advocates, is a necessary but not sufficient reform. The Center study does not draw that specific conclusion, but I think it follows logically from a realistic assessment of the negative impact that NAFTA.as a whole has on the situation of workers in Canada, Mexico, and the United States

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Prejudice against Obama

“The Obama campaign would do well to print signs to post prominently in its offices: ALWAYS SUBTRACT SEVEN PERCENT!”

That advice comes from Andrew Hacker, a political science professor at Queens College, in a September 25 New York Review of Books article titled: “Obama: The Price of Being Black.”

Hacker’s seven percentage point subtraction from pro-Obama poll results is based on the “Bradley effect,” named after Tom Bradley, the black mayor of Los Angeles who lost his 1982 bid for governor after every poll showed him ahead of his white opponent. Results in other elections indicate that many white voters don’t tell pollsters the truth about their feelings against black candidates.

Senator Barrack Obama faces another little discussed hurdle in his historic race for the White House. In a reversal of the decades-old trend to make the voting franchise universal, Hacker writes,

“…Now strong forces are at work to downsize the electorate, ostensibly to combat fraud and strip the rolls of voters who are ineligible for one reason or another. But the real effect is to make it harder for many black Americans to vote, largely because they are more vulnerable to challenges than other parts of the population.”

Hacker describes in detail how some new state and Federal rules – even “the amiably titled Help America Vote Act” –have the effect of placing a heavier burden on blacks to exercise their right to vote. One of his sources is “Restoring the Right to Vote” by Erika Wood, a 34-page publication of the Brennan Center for Justice of the New York University School of Law, which can be accessed here.

Hacker’s analysis does not mean Obama is bound to lose. It is, however, an alarm bell to unprejudiced whites, among whom a greater get-out-the-vote effort will be needed. At least seven percentage points greater.

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Who's the greatest of all?

Whatever the political orators might say, the United States has some keen competition these days from the world’s industrialized countries. Or as a press release of the Economic Policy Institute puts it, the United States has lost its bid for the gold in some crucial categories.

In per capita income, the U.S. comes in second to Norway, but even that high rank comes at a cost: longer working hours than in 19 other industrialized countries.

Currently the top one-tenth of the U.S. population collects 8.1 percent of the income. No wonder that the United States has the highest rate of inequality and the highest rate of poverty among its 19 peer countries.

Those data are from a chapter on international comparisons in The State of Working America 2008/2009, published by the Economic Policy Institute. The book is the 11th edition of what the Financial Times has called the “most comprehensive independent analysis of the U.S. Labor Market.”

“The message here for other countries is ‘Think twice before emulating the U.S. model,’” said Heidi Shierholze, author of the international chapter. “Many peer countries have caught up with or surpassed U.S. productivity while achieving much lower levels lof poverty, inequality, and unemployment.”

For more information, check EPI at http://www.stateofworkingamerica.org/.


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